A source of capital to a public company which attracts a fixed rate of interest is

This question tests knowledge of the different sources of long-term capital available to a public company.

A debenture is a certificate acknowledging a loan made to a company, on which the company agrees to pay the lender a fixed rate of interest at agreed intervals, regardless of whether the company makes a profit or a loss. Because the interest rate is fixed and must be paid before any dividend is considered, a debenture is correctly identified as the source of capital that attracts a fixed rate of interest.

The other options do not fit this description. An ordinary share entitles its holder to a dividend that varies depending on how much profit the company makes and how much the directors decide to distribute; there is no fixed rate attached to it. A subvention is a grant or financial assistance, often from government, and it is not a loan carrying a contractual interest rate. An overdraft is a short-term banking facility that allows a company to withdraw more than it holds in its account, and while it does attract interest, it is a short-term facility rather than a long-term source of capital for a public company in the way debentures are.

Whenever a question mentions a fixed rate of interest paid regardless of profit, this points specifically to debenture holders, who rank as creditors rather than owners of the company.